IR club clings to its super privileges

One group to agree that freedom of choice in super­annuation should be restricted by industrial awards is the industry funds that benefit from this requirement. This includes the president of the Australian Institute of Superannuation Trustees,
Gerard ­Noonan
, chairman of industry fund Media Super and a former editor of this newspaper, who has taken issue with this paper’s view that awards should not specify a default industry fund. He asks: why should the requirement for awards to specify an industry fund be seen as stymieing competition, when industry funds have better returns, for lower cost? He also points out that workers can still choose their funds.

But that is not the point. When Fair Work Australia designates industry funds as default funds, through the widespread “modernised" award system, these funds are leveraged into a privileged position. Once designated, workers’ compulsory savings are tipped into those vehicles. Workers may opt for an industry fund if given the choice, but otherwise the industry funds do not have to make a case for low returns and low fees. The superannuation money pours in anyway.

Noonan’s argument that it is wrong to describe the industry funds as union controlled would have more force if it was clear that these funds had a genuine mix of board members. But the government has hamstrung a Productivity Commission inquiry into default super funds by stressing in its terms of reference that default funds should still be included in modern awards. And it has stonewalled the Cooper review’s recommendation that one-third of industry superannuation fund board seats be occupied by independent directors.

Instead, industry funds tend to have an equal number of union and employer board representatives. In the case of Media Super, Noonan is chairman with four other union representatives matched by five employer representatives. The board’s independent director was formerly an employer representative of the printing industry super fund.

The Labor government says it wants competition in the finance industry, but it restricts competition in super. Rather than encouraging a system in which unions squabble over industry fund spoils, as seen last year in the battle over a seat on the $18 billion HESTA super fund board, the government should be promoting higher levels of governance in super.